The Earned Income Tax Credit (EITC) is designed to assist people with limited incomes by reducing the amount of federal income tax they owe. Even those who don’t earn enough money to owe federal income taxes may be eligible for an EITC.

The credit can be claimed when filing your annual federal tax return. For tax year 2023 (filing by April 2024), the EITC ranges from $2 to $7,430, depending on your adjusted gross income and the number of qualifying children in your family. There is no limit to the number of times you can claim an EITC; you can claim one every year that you are eligible.

Program Eligibility

To be eligible for the Earned Income Tax Credit you must meet several criteria:

• You must meet adjusted gross income requirements (see table above).
• You must have earned income from employment, self-employment, or employer-paid disability benefits received prior to retirement.
• You must have a Social Security Number valid for employment.
• You cannot file your taxes as “married filing separately.” If you’re married, you must file a joint tax return.
• You must be a U.S. citizen or resident alien. If not, you must be married to a U.S. citizen or resident alien and filing a joint tax return.
• You must live in the U.S. for more than half of the year.

Age Requirements:

• If you are claiming qualifying children, you can be any age.
• If you’re not claiming a qualifying child, you must be 25 to 64 years old.

Additional requirements:

• You cannot claim foreign income or a foreign housing deduction using Form 2555.
• You must not have investment income that exceeds $11,000 (for tax year 2023).
• You cannot be the dependent of another person.
• You cannot be the qualifying child of another person.

More on Earned Income

To qualify for an EITC, you must receive earned income. This can include your wages, salaries, tips, net earnings from self-employment, or any other form of taxable pay. You can also elect to include nontaxable combat pay as earned income.

Employer-paid disability payments received prior to retirement are considered earned income under the EITC program. But benefit payments received from a policy you paid the premiums for, or that you received post-retirement, would not be considered earned income.

Other items that do not qualify as earned income under the EITC include:

• Interest and dividends
• Social Security and railroad retirement benefits
• Pensions and annuities
• Alimony and child support
• Workers’ compensation benefits
• Unemployment compensation
• Welfare benefits
• Veterans’ benefits

If you are married and filing jointly, at least one spouse must receive earned income to be eligible for an EITC.

Adjusted Gross Income

In addition to the earned income requirement, you must have an adjusted gross income (AGI) below certain levels to qualify for an EITC.

Your adjusted gross income (AGI) includes all earned income before deductions for taxes, health care or other expenses, minus certain business, education-related, and other expenses. While filling out your annual tax return (IRS Form 1040), you will be asked a series of questions that will allow you to determine what your AGI is.

Adjusted Gross Income and Qualifying Children

For a child to be considered a qualifying child under EITC, several requirements must be met:

• Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example be your grandchild, niece, or nephew).
• Residence: Generally, the child must live in the same place as you for more than half the year and have a valid Social Security number. (There are some exceptions to this. For an overview, click here. For the complete list, you can read Publication 596 from the IRS.)
• Age: At the end of the tax year, the child must be under 19. Or, if attending school full-time, the child must be under 24. The only exception is for children who are permanently and totally disabled. If your child is permanently and totally disabled, the child can be any age, even an adult.

According to the IRS, a person is considered “permanently and totally disabled” if their condition is expected to last continuously for at least one year or is expected to result in death, and if they cannot perform any Substantial Gainful Activity (SGA). For tax year 2023, this means they cannot earn more than $1,470 per month ($2,460 per month if they are blind).

Note: Qualifying children can only be used by one family member to claim an EITC.

If you don’t have any qualifying children, the maximum adjusted gross income you can have and still qualify for an EITC is $17,640 ($24,210 for a couple).

With one qualifying child, your AGI can be up to $46,560 ($53,120 for a couple). With two or more qualifying children, you can have an AGI of up to $52,918 ($59,478 for a couple). And with three or more qualifying children, you can have an AGI of up to $56,838 ($63,698 for a couple).

Sources

If you are eligible for an EITC, you can get free tax preparation help through a Volunteer Income Tax Assistance (VITA) Center. Most centers can e-file your return for free. If you are self-employed, have all your receipts and a log of expenses ready for the tax preparer. To find a local VITA Center, check the Franchise Tax Board or the IRS VITA Site List.

IRS Publication 596 is a comprehensive guide to the EITC. It includes information on program rules, calculating and claiming an EITC, rules regarding qualifying children, and sample worksheets.

If you qualify, you will claim your Earned Income Tax Credit when you file your federal tax return. To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your IRS Form 1040 instruction booklet. If you have a qualifying child, be sure to attach a Schedule EIC. You can ask the IRS to calculate your tax credit for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To see if you qualify for an EITC, and how much it might be, use the IRS EITC Assistant.

Some Tips on Claiming an EITC and Tax Preparation

Keep all your W-2's and maintain a record of who you have worked for during the year. This will make things simpler when it comes time to file your taxes.

If you are on a limited income, do not pay someone to do your taxes. Use a Volunteer Income Tax Assistance (VITA) Center to file. Most centers can e-file your return for free. If you are self-employed, have all your receipts and a log of expenses ready for the tax preparer. To find a local VITA Center, check the Franchise Tax Board or the IRS VITA Site List.

Be sure to file your taxes, even if your income is so low that you are not legally required to file. You might be eligible for an EITC or some other tax credit. Many families with children who qualify for an EITC may also be eligible for a Child Tax Credit (CTC).

The following is a summary of the EITC requirements.

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)

You must have some form of earned income to qualify for an EITC. Social Security benefits do not count as earned income under the program. You can, however, be on Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) and claim an EITC as long as you have some form of earned income, including income from self-employment.

Long-Term Disability Insurance

Employer-paid long-term disability insurance benefits received prior to retirement count as earned income under the EITC and can therefore be used to qualify for the program. Disability insurance benefits for which you pay the premiums, or that you receive post-retirement, are not considered earned income and cannot be used to qualify for an EITC.

Individual Development Accounts (IDAs)

Money received from an EITC can be deposited into an Individual Development Account and matched.

Plans to Achieve Self-Support (PASS)

Money received from an EITC can be set aside in a PASS.